Trade Example – XAU/USD (Gold)

Filed under: Learn Forex Trading |

There was a possible trade setup on the XAU/USD pair yesterday (the pair for gold), but unfortunately, the order was not filled. However, I would like to run you through this setup regardless.

 

Figure 1.

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the XAU/USD pair. What you can see here is that price has recently been moving down, with the 8-day exponential moving average crossed well below the 21-day exponential moving average. The chart is also visibly moving down from left to right. I have also marked in a significant level of support/resistance, which price is now bouncing off. To add to this, this same level is also a 50% Fibonacci retracement area. Therefore, I was on the lookout for any price action signals at this confluent area.

 

Figure 2,

Figure 2,

If you now look at Figure 2, you will see the 4-hour chart for the same XAU/USD pair. What you can see here is that a very nice pin bar formed right at our confluent level. What I did here was to put an order in at a 50% retracement of this pin bar, with a stop loss placed just a few pips above the high of the pin bar, and a target set of two times the risk. Unfortunately, price came within just a few pips of this order, before continuing to move down. I have now cancelled this order, as price has already moved down to the target area. Sometimes the orders are filled and sometimes they are not. But by entering at a 50% retracement rather than at the close of the candle, we can get a much better risk-reward scenario, and this should pay off in the long run over a long series of trades. Well, that’s it for today – and I’ll be back with more forex trade examples tomorrow.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>